2018 YTD Performance Update:
DD TRADING Model: +3.2%
DD LEADERS MOdel: +2.8%
S&P 500: +2.6%
The State of the Market:
With the S&P 500 up 2.6% so far in 2018, it appears that, barring an unforeseen disaster today, the market will wind up with a gain for the first five trading days of the new year. And as the saying goes, "As the first five days of the year go, so goes the month." From there, another famous Wall Street-ism suggests, "As January goes, so goes the year." So, using these clichés as our guide, unless the bears can really find something to get excited about in the next 6.5 hours, it would appear that investors can position portfolios long the stock market and call it good for the year, right!
In my humble opinion, what we are seeing here is a classic melt-up. It's a new year and with the macro factors (economy, inflation, rates, fed, earnings, valuation) still favoring stocks, anyone positioning accounts for the long-term appears to be putting money to work. And this is part of the reason that January tends to be one of the best months of the year in the stock market.
However, it is important to note that (a) trees don't grow to the sky, (b) valuations matter, eventually, and (c) the current move is starting to look a bit parabolic (i.e. the current rate of ascent is unsustainable). As such, the odds would favor some sort of a pullback, corrective phase, or, at the very least, a pause in the joyride to the upside in the near-term.
Yet, technicians have been saying this for months now and the bulls have simply refused to yield. My take is there has been simply too much ...